I agree so bankrupt those that are involved on both sides, prosecute them for trying to sell what they do not have claim to and claim all those contracts null and void and lets remove the risk. All future derivatives must be openly traded and margined daily. It will take a long time to go through existing ones but some may be payable most I suppose would not.  Bankruptcy clears the mal- investment and imposes consequences for poor decisions.

They are unlawful contracts just the same as if I were trying to sell the Brooklyn bridge.  I don't have it and can't deliver it so it was never a valid contract to begin with just like the derivatives. These derivatives are also no different than pure gambling like at a casino. 

Of course this will take someone with a backbone to step up and put a stop to this. It will cause pain it will disrupt things but it will be solved not kicked on down the road where it's sure to destroy everything possibly including our form of government as they will surely try to put the tab back on the taxpayer for their stupid mistakes.